LLC or Corporation?: How to Choose the Right Form for Your Business [NOOK Book]

Overview

Decide whether to form an LLC or a corporation -- the most important decision you'll make for your business

Your company has grown -- now it's time to upgrade your legal structure to something that will protect you and your assets, as well as provide other benefits. In other words, your business is ready to become either a corporation or a limited liability company.

The ...
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LLC or Corporation?: How to Choose the Right Form for Your Business

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Overview

Decide whether to form an LLC or a corporation -- the most important decision you'll make for your business

Your company has grown -- now it's time to upgrade your legal structure to something that will protect you and your assets, as well as provide other benefits. In other words, your business is ready to become either a corporation or a limited liability company.

The question is, "Which one?" The answer isn't always clear -- but because your choice will affect the legal and tax status of your business, it's the most important question you'll need to answer.

LLC or Corporation? will help you make the right choice with plain-English explanations of:
. the basics of business entities
. how each business entity protects you from personal liability
. profits, losses and tax treatment
. converting from one type of business entity to another
. what to do if you conduct business out of state

Making the right choice will affect your bottom line in many ways -- from what you pay in taxes to your ability to seek money from investors. In LLC or Corporation? you'll find real-world conversion and formation scenarios that help to display all the options available to you.

This edition has been thoroughly and usefully updated with the latest resources for business owners and contains the newest information on small business taxes.
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Editorial Reviews

Midwest Book Review
An in-depth guide [which] covers all aspects of this decision.
Small Business Opportunities
Outstanding. Crystal clear, rock-solid, no-nonsense, accessible information. Great 'real life' examples without any fluff.
Small Business Opportunities
Outstanding. Crystal clear, rock-solid, no-nonsense, accessible information. Great 'real life' examples without any fluff.
The Midwest Book Review
"An in-depth guide [which] covers all aspects of this decision." The Midwest Book Review
From the Publisher
"An in-depth guide [which] covers all aspects of this decision." — The Midwest Book Review
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Product Details

  • ISBN-13: 9781413317480
  • Publisher: NOLO
  • Publication date: 9/1/2012
  • Sold by: Barnes & Noble
  • Format: eBook
  • Sales rank: 473,963
  • File size: 5 MB

Meet the Author

Anthony Mancuso is a corporations and limited liability company expert. He graduated from Hastings College of Law in San Francisco, is a member of the California State Bar, writes books and software in the fields of corporate and LLC law, and studies advanced business taxation at Golden Gate University in San Francisco. He has also been a consultant for Silicon Valley EDA (Electronic Design Automation) companies, most recently working on a C++ open-source integrated circuit database project team. He is the author of several Nolo books on forming and operating corporations (both profit and nonprofit) and limited liability companies. His titles include Incorporate Your Business, How to Form a Nonprofit Corporation (national and California editions), Form Your Own Limited Liability Company, The Corporate Records Handbook, and LLC or Corporation? His books have shown over a quarter of a million businesses and organizations how to form a corporation or LLC.
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Read an Excerpt

Introduction

If you are starting a business (by yourself or with others) and trying to figure out whether a limited liability company (LLC) or corporation will best meet your needs, this book will help you make the right choice. If you have already organized your business but want to explore the possibility of converting to a business entity with more favorable legal and tax characteristics this book will help you make an informed decision.

Although the focus of this book is on choosing whether to form an LLC or a corporation, you cannot make an informed decision without learning about all the types of business entities -- including sole proprietorships, partnerships, LLCs, and corporations. this book explains the legal and tax characteristics of each of these business entities and the basic rules for converting one type of business to another. This book also provides information about some of the less well known entity ways of structuring a business. For example, two legal spin-offs of the basic partnership form -- the limited partnership and the registered limited liability partnership -- are discussed in this chapter. This book also covers S corporations, which have some characteristics of the more well known C corporation (including limited liability) but are taxed like a partnership.

The book is divided into two parts. Part One, Understanding Business Entities, discusses basic information about each type of business entity. It includes the following chapters:

* Chapter 1 discusses each type of business entity, including the relative advantages and disadvantages of each.
* Chapter 2 explains how your choice of entities affects your personalliability for debts against your business.
* Chapter 3 examines the relative ease with which each of the entities can be formed and managed.
* Chapter 4 covers how each entity deals with profits, losses, investments, and taxes.
* Chapter 5 explains how doing business out of state may affect your choice of entity.

Part Two, Converting or Modifying Your Business Entity, includes the following chapters:

* Chapter 6 discusses converting a sole proprietorship to another entity.
* Chapter 7 discusses converting a partnership to another entity.
* Chapter 8 discusses converting a limited liability company to another entity.
* Chapter 9 discusses converting a corporation to another entity, and reorganizing or dissolving a corporation.
* Chapter 10 provides examples of various conversion scenarios discussed in previous chapters.

This book also includes each state's corporate and LLC website information (in the appendix).

Although business law and tax rules can get a bit complicated, don't worry: they're presented here in real-life contexts, without off-putting legal or tax jargon, and without the technicalities best left to legal and tax professionals. You'll also find an array of resources, including books and websites that will help you figure out the ideal entity type for your business. By the time you finish this book, you'll understand what each type of entity has to offer, and you'll be ready to choose the right structure for your company.
Why Your Choice of Entity Matters

Do you really have time to read this book? Shouldn't you be devoting more time to your accounting, your competition, your overhead, or your business plan? After all, as Calvin Coolidge once said, "The chief business of the American people is business" -- so why not hire a lawyer to advise you about your legal form, put down this book, and get back to work?

Here are three reasons why you need to learn more about the various legal forms your business might take:

* You're making a business decision. Your ability to raise capital, defend your rights, survive business taxation, or manage your company efficiently is all tied to your choice of business entity. In other words, your decision about what type of business entity to form can be as crucial to your business success as your marketing, hiring, or sales decisions. The only way you can be sure you're on the right course, even if you hire a lawyer, is to understand the legal and financial basics of each business structure.
* You'll save money. Hiring a lawyer can be helpful, particularly if there are disputes among multiple owners of a business. But hiring a lawyer can also be expensive or unnecessary. If you take the time to read this book, you can save money and make a reasoned decision about your choice of entity. You can also save money by using products or services that specialize in business formation.
* You'll keep your options open. Every growing business changes its form of entity. Most start as sole proprietorships or partnerships and then evolve into corporations or LLCs. The business entity you choose today may affect your choice of entity in the future. In other words, you're not just picking a business form; you're plotting a business strategy. The more information you have, the better equipped you will be to plot the right course.

Now that you know why this is an important decision, it's time to learn some basic information about each type of business entity.
Sole Proprietorships

The simplest way to be in business for yourself is as a "sole proprietor." This is just a fancy way of saying that you are the owner of a one-person business. There's almost no cost or bureaucratic red tape involved in forming a sole proprietorship, other than the usual license, permit, and other regulatory requirements that your state and/or locality imposes on any business. And you don't have to do anything to create a sole proprietorship: If you start a one-person business and don't form a corporation or LLC, you have created a sole proprietorship, and that's how the state and the IRS will treat your business.

As a practical matter, most one-person businesses start out as sole proprietorships just to keep things simple.

EXAMPLE: Winston is a graphic artist who started a sideline computer graphics business in his garage. Winston works only part time in his own business and has no employees. He has just a couple of clients and no pressing personal liability issues, so he chooses to operate as a sole proprietor (his other choices would be to form an LLC or a corporation). Outside of a business license, fictitious name filing, and tax permit, Winston does not need to file any legal paperwork. Unless Winston takes steps to change the legal structure of his business -- by filing the necessary papers with his state to form a one-person LLC or corporation -- his business will automatically be classified and treated as a sole proprietorship.

Number of Owners

By definition, a sole proprietorship has only one owner. If your one-person business grows and you wish to include other owners, you will need to choose another business structure, such as a partnership, LLC, or corporation.
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Table of Contents

Part I

1. Business Entity Basics
Why Your Choice of Entity Matters
Sole Proprietorships
General Partnerships
Limited Liability Companies (LLCs)
Corporations
... And the Runners-Up: Limited Partnerships, S Corporations, and RLLPs

2. Personal Liability Concerns
How Your Choice of Business Entity Affects Personal Liability
Using Insurance to Limit Liability


3. Forming and Running Your Business
Forming and Running a Sole Proprietorship
Forming and Running a Partnership
Forming and Running a Limited Liability Company
Forming and Running a Corporation
Resources for Forming an LLC or Corporation

4. Money Issues: Taxes, Profits, Losses, and Investments
Taxes
Paying Out Profits
Startup Losses
Institutional and Venture Capital
Planning for a Public Offering

5. Doing Business Out of State
Doing Business Out of State
Qualifying to Do Business
Paying and Collecting Taxes in Other States
Lawsuits in Other States
Internet Issues

Part II

6. Converting a Sole Proprietorship to Another Entity
Converting a Sole Proprietorship to a Partnership
Converting a Sole Proprietorship to an LLC
Converting a Sole Proprietorship to a Corporation

7. Converting a Partnership to Another Entity
Converting a Partnership to a Sole Proprietorship
Converting a Partnership to an LLC
Converting a Partnership to a Corporation

8. Converting an LLC to Another Entity
Converting an LLC to a Corporation
Converting an LLC to a Sole Proprietorship
Converting an LLC to a Partnership

9. Converting, Dissolving, and Selling a Corporation
Converting a C Corporation to an S Corporation
Liquidating and Dissolving a Corporation
Selling a Corporation

10. Business Choice and Conversion Scenarios
Fast Food Fusion: A Startup Business Chooses a Business Form
Bill and Barbara Seek Investment From a Relative
Soaring Duck Designs Seeks Lower Taxes and a Structured Hierarchy
Silikonics Creates an Entity to Attract Outside Investors
The Surf Side: From Lunch Counter to LLC to Corporate Franchise

Appendix: State Website Information

Index
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Customer Reviews

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Sort by: Showing all of 3 Customer Reviews
  • Posted December 12, 2011

    Recommended as a Handy Reference

    I found this book to be a centralized place to compare the two types of structures. It's also an excellent resource to educate yourself on terminology and laws that will apply to your LLC or Corporation. If you purchase this book to acquire your foundation knowledge, it will decrease the amount of time you'll pay your attorney because they won't be having to educate you along the way.

    1 out of 1 people found this review helpful.

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    Posted July 25, 2010

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